Motorists

Fuel Pricing

Breaking down the cost of fuelling up

Want to know why your tank of fuel costs what it does? Here’s the lowdown.

The cost of fuel at the pump is made up of four parts.

1. What we pay

We buy crude oil as well as refined petrol and diesel. The amount we pay is made up of:

the cost of petrol and diesel on the international market

the cost to ship fuel to New Zealand

Like the rest of the world, we buy fuel in United States dollars (USD). So the price we actually pay for each barrel of oil also depends on how strong the New Zealand dollar (NZD) is against the USD.

2. Government taxes & levies

A good chunk of the cost of each litre of fuel you buy is made up of Government taxes and levies. This includes GST, excise tax, ACC and emissions trading levies for petrol, and monitoring and emissions trading levies for diesel. At the moment, 67.13 cents per litre is collected by the government in fixed excise (excluding GST). In addition, a GST of 15% is collected on the overall price of fuel.

3. Operating costs

Our operating costs include staff wages, the stuff we use to bring fuel to you like shipping, storage tanks and trucks, electricity, credit card fees and all the other things we need to run our business.

4. Our net profit

After we’ve paid for fuel, taxes and levies and accounted for our operating costs, we earn a net profit of about 4-6 cents per litre across our network. You don’t just have to take our word for it – we’re a publicly listed company so it’s easy to find out how much money we are making by visiting our Investor Centre.

What you’ve asked us about petrol pricing

We often get asked questions about petrol pricing, and we’re happy to answer them. Here are the answers to some of the most common questions Z customers have recently asked us.

Why does the price of fuel change?

The price of fuel is made up of four parts: the cost of crude oil or refined petrol and diesel on the international oil market; government taxes and levies; operation costs; and the profit margin. The cost of a barrel of crude oil as well as barrels of refined oil products (ie petrol and diesel) on the international market changes all the time, and these changes affect the price at which we can sell fuel at. Some of the reasons why the price of oil and oil products on the international market changes include:

Market forces, including supply and demand and seasonal demands; and

Global events, including wars or unrest in oil producing regions, or security threats to oil supplies.

Another factor that dictates the price at which we buy fuel is the international exchange rate. Like the rest of the world, we buy fuel in US dollars. So the price we actually pay for each barrel of oil depends on how strong the NZ dollar is against the US dollar.

Why is petrol cheaper in Australia?

Petrol is cheaper in Australia because there are a lot more taxes and government levies on petrol in New Zealand. If you took these taxes and levies away, New Zealand and Australia would have pretty similar petrol prices.

In fact when you look across a whole bunch of countries in the OECD, our prices in NZ are about the 7th cheapest. Australia’s petrol price is currently the lowest in the OECD apart from North America and Mexico.

Why is there a difference in fuel prices at different Z stations?

Most motorists across New Zealand pay about the same amount for fuel. However, there are some places where prices are discounted, which is because of heated local competition around pricing. The fuel industry is highly competitive throughout NZ, but there are some areas where competition is particularly aggressive.

There are also a few places that are a bit more expensive - this might be because they are more remote and it costs us more to truck in fuel.

If you're discounting at some stations, why can't you offer a discount at all Z stations in New Zealand?

We simply can’t – we operate a high cost, low margin business and there’s just not enough of a buffer in our profit margin for nationwide discounting.

Why is the price at other fuel companies' stations different to the price at Z stations?

We don’t know why other companies charge what they do - that’s up to them. We do know that prices vary a lot across the country, but we always aim to be competitive and give our customers value for money.

What do you mean when you say you provide the best value compared to other petrol companies?

We are absolutely committed to providing Kiwis with the best value, as well as a competitive price on the price board. Value can mean Airpoints Dollars, Fly Buys points, a quick and easy Zip Thru Z customer experience, forecourt concierges, support of local neighbourhoods, and investing in New Zealand’s fuel network to ensure people have fuel where and when they need it. On top of this, we have an additive in our petrol that helps keep your engine clean - not all of our competitors do this, or do it consistently.

We’re also keen on making sure you get the most out the fuel you do buy. We’ve created an eco-driving tool to help you do this. Check our eco-driving tool.

When the price of oil goes down do you pass cost savings on to us at the pump?

Yes, we do. We pass on price decreases as quickly as we can, and we also absorb international price increases for as long as we think we can. You don’t have to just take our word for it. The NZ Institute of Economic Research has done some research on New Zealand fuel price movements. Their research concludes that while people often think fuel companies are quick to raise prices but slow to lower them, actually the price at the pump go up and down at roughly the same speed. You can read their full report online.